Pacific Grove Unified outlines multiyear budget shortfall and options as one‑time funds expire

Pacific Grove Unified School District administrators presented a budget study session on the 2025–26 budget that warned of continuing deficits as one‑time state and federal funding sunsets and long‑term costs — especially health benefits and pension obligations — continue to rise.

At First Interim, staff reported a combined deficit position and highlighted that a large share of district revenue is local property taxes. Staff told the board that the district’s total projected revenues and expenditures and the continued decline in some restricted revenue streams leave the district facing work to align spending with realistic ongoing revenues for 2025–26 and beyond.

Chief business staff described three areas of focus for budget development: (1) identifying restricted programs that have already or soon will expire and the resulting encroachment on the unrestricted general fund; (2) reviewing historical enrollment and staffing ratios to align personnel with projected student counts; and (3) developing options to reduce unrestricted general fund expenditures to limit annual deficit spending. The presentation noted that roughly 85% of district revenue is derived from local property taxes and that federal and some state restricted revenue sources have fallen since the ESSER and pandemic‑era funding peaks.

Presenters said ESSER and other one‑time grants had funded temporary positions and services to address pandemic learning loss and students’ social‑emotional needs; several of those positions remain in place but now are funded by the general fund. Staff gave examples: additional instructional assistant hours, intervention teachers and mental‑health therapists funded in part or whole by one‑time federal grants during the pandemic. Those ongoing payroll and benefit costs create what staff described as an “encroachment” on the unrestricted general fund when the original restricted revenue ends.

Staff also described a recent one‑time assessment from the joint powers health insurer (MixSig) that required a pro rata payment; the assessment was paid from unrestricted funds. Board members asked for follow‑up about alternatives to MixSig and staff said the district is evaluating other pooled options including CaliforniaValuedTrust and PERS health programs, with a decision timeline tied to open enrollment cycles.

Trustees and staff discussed enrollment trends: the district has declined in total student count over the last decade, while staffing (measured in full‑time‑equivalent positions) increased over the same period to support interventions, mental‑health services, expanded electives and expanding device and technology support. Staff urged the board to consider strategic alignment of staffing to enrollment (for example reviewing elementary class size practices and whether some positions funded on expired restricted resources should be continued). Trustees commented that some programs and support (mental‑health services, IT, campus supervisors) reflect changing expectations and student needs since the pandemic.

Staff laid out next steps and timing: site budget development meetings are scheduled through April; staff will present a draft budget by May 15 and bring a budget for board adoption in June. Options under consideration include targeted reductions in discretionary spending, program resizing to match revenue, negotiating health‑benefit caps in bargaining, and preserving reserves for volatility in property‑tax receipts.

No formal action to adopt a budget was taken at the session; board members made a separate motion later in the meeting to extend the special meeting hour limit and the extension motion passed. Staff will return with more detailed, disaggregated data requested by trustees (for example a breakdown of the roughly 50‑FTE increase over the past decade by certificated vs. classified positions, and the specific dollar impact of positions that shifted from restricted to general funds).